Have you heard the story about Douglas "Wrong Way" Corrigan? He was an aviator in the 1930s who was supposed to fly from New York to California – and he instead landed in Ireland, hence the nickname. After Thursday’s letter to the SEC, Sen. Elizabeth Warren should be awarded that same moniker.
Sen. Warren followed up on her comments last month to SEC Chairwoman Mary Jo White and sent the letter to the Securities and Exchange Commission castigating the agency for moving forward with efforts to modernize corporate disclosures. The letter gets the facts wrong and sets forth a vision that is not consistent with the realities of today's economy. This is not surprising from the person who recently unveiled a politically fueled, no-growth agenda for Wall Street.
Today we have less than half of the number of public companies than we did in 1996, and that number has gone down 19 of the last 20 years. Many have pointed to the proxy statement and disclosures that have exploded over the past several years as impediments to going or staying public. Stanford University released a study of institutional investors, who control over $17 trillion dollars in assets, finding that the majority found the proxy statement to be too long and that only a third of the information was relevant. Disclosures that don’t convey decision-useful information just take up time, money and effort.
For years the SEC ignored calls from investors and advisory committees to modernize these rules. The bipartisan JOBS Act included a provision asking the SEC to look into these issues simply to prompt the agency into action. Chairwoman White, to her credit, decided to take the bull by the horns and at least start the effort.
As a result the Chamber released a study on disclosure effectiveness where we identified 14 regulations that are obsolete and five broad areas that need to be modernized. As an example, having to disclose an annual historic stock price is as relevant as a horse and buggy in the age of the iPhone.
That was just a first step, and we will issue a second study later this year. Why? Because the SEC has a mission of investor protection, capital formation and competition. With the outflow of public companies, the existing system is broken and the economy is paying the price.
Investors, businesses and the American economy can't afford backward-looking regulations rooted in the New Deal that were last updated during the days of “Saturday Night Fever.” Disco era rules don't work in the era of a global high-tech economy. Let's ditch the wrong way and modernize our regulatory system as a first step forward for pro-growth policies.